Non-compliance issues pointed out in Muni’s qualified audit report

Executive Mayor of Polokwane, Cllr Thembi Nkadimeng

POLOKWANE – The Polokwane Municipality received a qualified audit report from the Auditor-General (AG) for its 2016/17 financial statements with a series of non-compliance issues and controls deficiencies being pointed out by the office of the AG.

You might also want to read: Audit reveals Polokwane Muni underspent millions

Double payments amounting to R35,3 million

The municipality paid some suppliers twice for the same goods and services to an amount of approximately R35,3 million, the AG found.

In some instances it was also found that officials altered invoice numbers when processing the payments to bypass controls that are in the SAMRAS system. An invoice register was not maintained to record all invoices received and paid in order to avoid invoices being paid more than once. Unexplained non-cash items amounting to R73,5 million were included in the reconciliation of cash generated from operating activities.

Expenditure

Material findings on compliance with specific matters in key legislation were made. Irregular expenditure of R199 million was incurred, and unauthorised expenditure amounted to R292,5 million. The majority of the unauthorised expenditure, according to the AG, was caused by under-budgeting for non-cash items and irregular expenditure was mostly the result of non-compliance with supply chain regulations and prescripts.

“An effective system of expenditure control, including procedures for the authorisation and payment of funds, was not in place as required by law,” the AG found. Tenders were also awarded to providers whose directors or principal shareholders are in the service of the municipality or in the service of other state institutions.

Land valuation

The AG was unable to find sufficient appropriate audit evidence for devaluation of land to the value of R188,9 million and was unable to determine whether any adjustment relating to land stated at R48,6 million was necessary. Explanation and supporting evidence could not be provided on how the municipality valued land parcels in different suburbs such as Flora Park, Seshego and Bendor using the same unit rate.

Water and electricity

Appropriate evidence for the basis used by the municipality when estimating the consumption of water and electricity was not provided to the AG and the municipality could also not provide a list of consumer accounts where the actual reading was not conducted. The AG was unable to verify if the estimated consumption charged to consumers was reasonable and the SAMRAS system could not differentiate between accounts where the consumption was estimated and the ones where the actual reading was used.

Assets

No assessment was conducted on the asbestos concrete pipes being replaced currently to determine if values need to be reduced or written-off. The municipality has not assessed whether infrastructure assets were still in good working condition and able to provide service as intended. Assessments need to be conducted annually. Boreholes with damage were identified, and dry boreholes identified by the AG, to determine values.

The municipality is currently involved in litigation with several service providers, employees and third parties, the ultimate outcome of which cannot be determined. Material impairments to the amount of R526, 12 million were raised to provide for irrecoverable trade debtors as a result of doubt of the collectability of long-outstanding consumer debts.

Reported achievement of various targets were stated incorrectly in the municipal financial and performance statements.

The AG found revenue information not being reliable due to weaknesses in the process and controls over revenue management not adequately addressed and the lack of regular monitoring and reconciliation of revenue information. Leadership was criticised for being slow in addressing weaknesses in preparation of financial statements, monitoring of non-compliance with legislation. The accounting officer came under scrutiny from the AG for not adequately monitoring adherence to the plan to address internal and external audit findings.

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  AUTHOR
Nelie Erasmus
JOURNALIST

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